This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.

Monday, May 18, 2015

Charging Orders and Professional Firms

Charging
Orders and Professional Firms

A recent letter decision from
Virginia addresses and rejects the assertion that a charging order cannot be
issued against an interest in a professional LLC, or at minimum may be issued
only in favor of a person similarly licensed in the profession.Southern
Bank and Trust Company v. Joshi, Civil Docket No. CL14-5435, letter
decision of April 20, 2015 (Fourth Judicial Cir. Of Va, Cir. Ct. City of
Norfolk, Judge John R. Coyle III).

Southern Bank held a judgment
against Joshi, and moved for a charging order against his interest in an
accounting professional LLC.

The only
issue before the Court is the legal question of whether the provisions of
Virginia Code Section 13.1-1041.1 to apply to a PLLC; and more specifically
whether the Court can enter a charging order … against a member of a PLLC on
behalf of a creditor who is not a member of the profession engaged in by the
PLLC.

The Court found that a charging order may be entered against
the interest of a professional in a PLLC just as it can against any interest in
an LLC that is not a PLLC.

“Because the charging
order merely allows FirstMerit to garnish Bhupinder’s financial interest in The
Center, it does not allow the unauthorized practice of medicine or violate the
terms of the operating agreement.”